Related Publications

High Court: NFL Licensing Conduct Constitutes Concerted Action

WASHINGTON, D.C. — (Mealey’s) The U.S.
Supreme Court on May 24 unanimously held that conduct by the National
Football League, its 32 teams and the clubs’ wholly owned licensing
company in granting an exclusive license to Reebok International Ltd. to
use the NFL’s and teams’ trademarks on apparel constituted concerted
action “that is not categorically beyond the coverage of” Section 1 of
the Sherman Act and that is to be judged under the rule of reason (American
Needle, Inc. v. National Football League, et al., No. 08-661, U.S.
Sup.).

American Needle Inc., which was
granted licenses to use the NFL’s and teams’ trademarks on headwear it
manufactured until 2000, when NFL Properties entered into an exclusive
license with Reebok, sued the defendants in the U.S. District Court for
the Northern District of Illinois. The District Court ruled that,
in the facet of their operations respecting exploitation of intellectual
property rights, the defendants “have so integrated their operations
that they should be deemed a single entity rather than joint ventures
cooperating for a common purpose.” The Seventh Circuit U.S. Court
of Appeals affirmed.

In reversing, the court, in an opinion written by
Justice John Paul Stevens, said that “the inquiry is one of competitive
reality. . . . The question is whether the agreement
joins together ‘independent centers of decisionmaking.’ . . . If it does, the entities are
capable of conspiring under §1, and the court must decide whether the
restraint of trade is an unreasonable and therefore illegal one.”

Here, “[t]he NFL
teams do not possess either the unitary decisionmaking quality or the
single aggregation of economic power characteristic of independent action. Each of the teams is a
substantial, independently owned, and independently managed business,”
the court said, finding that “the teams compete in the market for
intellectual property. .
. . When each NFL
team licenses its intellectual property, it is not pursuing the ‘common
interests of the whole’ league but is instead pursuing interests of
each ‘corporation itself.’
. . . Decisions
by NFL teams to license their separately owned trademarks collectively
and to only one vendor are decisions that ‘depriv[e] the marketplace of
independent centers of decisionmaking,’ . . and therefore of actual or
potential competition.”

Moreover, “it is not
dispositive that the teams have organized and own a legally separate
entity that centralizes the management of their intellectual property,”
Justice Stevens wrote.

In remanding, the court instructed
that that the “flexible” rule of reason applies when “restraints on
competition are essential if the product is to be available at all” and
that “features of the NFL” “may well justify a variety of collective
decisions made by the teams.”